# Project #6981 - Decision Science

The director of career advising at Orange Community College wants to use decision analysis to provide information to help students decide which 2-year degree program they should pursue. The director has set up the following payoff table for six of the most popular and successful degree programs at OCC that shows the estimated 5-year gross income (\$) from each degree for four future economic conditions:

 Degree Program Economic Conditions Recession Average Good Robust Graphic Design 145,000 175,000 220,000 260,000 Nursing 150,000 180,000 205,000 215,000 Real Estate 115,000 165,000 220,000 320,000 Medical Tech 130,000 180,000 210,000 280,000 Culinary Tech 115,000 145,000 235,000 305,000 Computer IT 125,000 150,000 190,000 250,000 Probability 0.2 0.4 0.3 0.1

Determine the best degree program in terms of projected income, using the following decision criteria:

a.       Maximax

b.      Maximin

c.       Equal likelihood

d.      Hurwicz (alpha = .6)

e.      Minimax regret

f.        EOL (expected opportunity loss)

g.       The director of career advising at Orange Community College has paid a small fee to a local investment firm to indicate a probability for each future economic condition over the next 5 years, which is shown in the last row of the above table. Using expected value determine the best degree program in terms of projected income.

h.      Determine the EVPI of this problem.

Fenton and Farrah Friendly, husband-and-wife car dealers, are soon going to open a new dealership. They have three offers: from a foreign compact car company, from a U.S.-producer of full-sized cars, and from a truck company. The success of each type of dealership will depend on how much gasoline is going to be available during the next few years. The profit from each type of dealership, given the availability of gas, is shown in the following payoff table:

 Dealership Gasoline Availability Shortage (0.6) Surplus (0.4) Compact cars \$300,000 \$150,000 Full-sized cars -100,000 600,000 Trucks 120,000 170,000

The Friendlys are considering hiring a petroleum analyst to determine the future availability of gasoline. The analyst will report that either a shortage or a surplus will occur. The probability that the analyst will indicate a shortage, given that a shortage actually occurs is .90; the probability that the analyst will indicate a surplus, given that a surplus actually occurs is .70.

a.       Construct a decision tree to determine the optimal strategy for Friendlys using TreePlan in Excel.

b.      Determine the maximum amount the Friendlys should pay for the analyst’s services. (EVSI)

c.       Compute the efficiency of the sample information for the Friendly car dealership.

 Subject Mathematics Due By (Pacific Time) 05/29/2013 06:00 pm
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